NPS exit rules after December 2025, explained

Until December 2025, every NPS subscriber exited on the same terms regardless of how large or small their corpus was: up to 60% as a lump sum, at least 40% locked into a mandatory annuity. PFRDA replaced that single flat rule with three corpus-size tiers — and for most subscribers, the new rule is considerably more generous than the old one ever was.

The old flat 60/40 rule, and what replaced it

The pre-reform rule didn’t care whether a subscriber’s corpus was ₹5 lakh or ₹50 lakh: 60% could be withdrawn as a lump sum, and the remaining 40% had to buy an annuity, full stop. That rule hasn’t disappeared entirely. Government employees are still held to it exactly, untouched by the reform. For everyone else, December 2025 replaced it with a tiered structure where the lump-sum ceiling depends on the size of the corpus itself.

The three tiers, and where each corpus size lands

A corpus of ₹8,00,000 or less can be withdrawn entirely as a lump sum: no mandatory annuity purchase at all. Between ₹8,00,000 and ₹12,00,000, a flat ₹6,00,000 lump-sum ceiling applies, with everything above that pushed into an annuity. Above ₹12,00,000, the ceiling becomes a percentage again — 80% of the total corpus as lump sum, with the remaining 20% mandatorily annuitized.

The same corpus, old rule vs. new rule

Running the same three corpus sizes through both rules shows how much the tiers actually changed, particularly for smaller retirement savings.

The reform is more generous at every corpus size tested here, but it’s worth knowing that a bigger lump-sum ceiling isn’t automatically a bigger tax-free amount — the separate tax-exemption cap on the lump sum wasn’t widened to match, so a larger lump sum at the top tier can partly become taxable even though the withdrawal ceiling itself went up.